Sweden: An Employment Overview

The Swedish Labour Law Model

Almost 90% of all employers in Sweden are members of an employers’ organisation, and thereby covered by the terms and conditions of collective bargaining agreements (CBAs). Since most large companies are members of an employers’ organisation, this means that almost 90% of all employees in Sweden are also covered by CBAs. And this in turn means that the greater part of Swedish labour and employment law consists of regulations established through CBAs. Hence, the Swedish labour law model is characterised by self-regulation, where CBAs play an important role.

A CBA is binding on all employers and employees who are members of any of the organisations which have concluded it. An employer bound by a CBA is required to apply the regulations in that CBA to all employees occupied by the work covered by it. CBAs generally cover all key terms and conditions of employment, such as form of employment, salary, working hours, vacation, pension and other insurances, notice periods, etc. Furthermore, a CBA provides employees and trade unions with a higher degree of co-determination regarding the employer’s business.

In contrast to other European countries, there is no system in Sweden for making CBAs generally applicable (ie, there is no procedure for the government to enhance a CBA to law), neither is there any legal obligation for an employer to enter into a CBA. However, a trade union that wishes to enter into a CBA with an employer has, under certain circumstances, the right to take industrial action against the employer in order to conclude a CBA. Recent experience has shown the extensive lengths to which trade unions are prepared to take such action to compel employers to conclude a CBA. Generally, the risk of becoming subject to industrial action in this respect increases with the size of the employer.

Due to the long-standing tradition of self-regulation by the parties on the labour market through CBAs, the Swedish legislature is only responsible for a minor part of the regulations in the labour market. For example, there is no statutory minimum wage in Sweden. Another significant feature of the Swedish labour law model is that the statutory regulations almost exclusively consist of civil rules for which there is no regulatory oversight, except in the areas regarding work environment and working hours.

Issues related to conducting business activities in Sweden and the posting of workers to Sweden

When conducting business activities in Sweden, a foreign company must – as a general rule – conduct its business through a branch office or a Swedish subsidiary. If that obligation is not observed, fines may be imposed. The Swedish branch or subsidiary must comply with Swedish accounting and financial reporting legislation.

A foreign company established within the EU can post employees in Sweden on a temporary basis. A posting is conducted when a foreign employer sends one or several employees to Sweden to perform services for a recipient there, usually a customer or a group company. The Swedish Posting of Workers Act (PWA) is then applicable, which incorporates an EU Directive concerning posting of workers.

A foreign employer must report the posting of employees in Sweden, along with certain information concerning the posting, and provide details for a contact person in Sweden to the Swedish Work Environment Authority. If that obligation is not observed, the Work Environment Authority could impose a fine on the employer.

The PWA lists a number of Swedish statutory provisions (the so-called “core obligations”), that a foreign employer must comply with if one of their employees is posted to Sweden, irrespective of which country’s law would otherwise be applicable to the employment relationship. These core obligations include, among other things, regulations on the number of paid vacation days, parental leave, and working hours.

The foreign employer must ensure that the posted employee receives, at least, the same basic work and employment conditions as those that would have applied if the posted employee was employed directly by the Swedish recipient in the same job (the so-called “principle of equal treatment”). The principle applies to certain categories of conditions, one of which is payment.

If a foreign employer does not comply with these core obligations or the principle of equal treatment regarding pay in the PWA, a Swedish trade union may have the right to take industrial action against such employer in order to conclude a CBA for the posted employee(s). However, a trade union’s right to take industrial action against a company based within the EU is only permitted if the action does not interfere with fundamental EU principles regarding free movement.

If the posted employee is a temporary agency worker, different rules apply. In such cases, the employee must be granted at least the same basic working and employment conditions as someone hired directly by the company. If the foreign employer does not comply, it is liable to pay financial compensation to the employee.

Conducting business in Sweden as a foreign company also gives rise to several tax issues. A foreign employer paying compensation to employees for work conducted in Sweden must generally be registered as an employer in Sweden and pay the employer’s contribution on the salary. If the foreign company is considered as having a permanent establishment in Sweden, additional obligations are imposed on the company. For example, this makes the foreign company liable for paying business income tax in Sweden and is subject to different tax administration obligations.

New rules within Swedish labour and employment law 

New rules in employment and labour law follow from upcoming acts and judgments of the Labour Court. They all originate from EU directives.

The rules on pay transparency will create a significant administrative burden for employers in Sweden and throughout the EU. The purpose of the rules in Directive (EU) 2023/970 is to ensure equal pay. Unfortunately, what the EU Directive lacks is flexibility regarding the practices of different countries when it comes to effective wage formation. In Sweden, the rules of the upcoming act will entail several fundamental changes and require Swedish employers to administer parallel tracks within their administration.

The Labour Court recently ruled that an employee on parental leave, with the support of Council Directive 92/85/EEC, has the right to return to her previous duties after the end of the parental leave (Judgment AD 2025 No 53). This principle conflicts with the freedom that employers normally have to organise and reorganise their operations.

One area that has been seen as problematic in Sweden is whistle-blowing under Directive 2019/1937. The rules could mean that an employer might be unable to resolve conflicts within a staff group. The Labour Court has now issued a ruling clarifying that, in the area of HR, the main principle remains that the law does not apply (Judgment AD 2025 No 47). The ruling means that employers can therefore resolve all kinds of conflicts within staff groups in a rational manner.

In the area of non-competition clauses, a special central arbitration board has issued important rulings. Among other things, the rulings clarify the clear main rule that non-competition clauses are only permitted if the employer has strong reasons and that the length of the binding period must be compatible with such reasons.

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Erik Danhard of Advokatbyrån Erik Danhard is the author of this article.